Posted by forex at 4:46 AM
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1. Select a currency and input the symbol for that currency market on a price chart. Look for periods of price action where the currency is clearly moving from one point to another point before declining in price.
2. Mark the start point of the currency's price move to the point just before the decline. Calculate the sum of the point. For example, if the currency moves from $100 to $150 before declining, then the currency had a $50 move.
3. Calculate the decline before the currency's price begins to resume its price move. To continue the above example, take $50 and multiply it times the .318 fibonacci ratio, which would be $15.9.
4. Subtract $15.9 from $150 and you get $134.10. As long as the price of the currency did not fall below this total, then it is likely to resume its trend.
5. Go back and calculate the price target by taking the original $50 price move before the decline and then add it to the .318 retracement ration of $134.10. This gives you a currency price target of $184.10.
6. Enter the trade as the currency's price action moves above its previous high of $150, proving itself in that it is actually resuming its upward trend, and monitor the trade until it hits its fibonacci price target of $184.10.